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Jackson adopts budget excluding potential big costs

The hospital system’s budget, which county commissioners must approve by Sept. 30, excludes mention of potential budget busters.

Jackson Health System, Miami-Dade’s public hospital network, faces a slew of challenges entering 2015, according to administrators: a reduction in patient admissions, contentious negotiations with labor unions who expect the restoration of $18 million in pay increases and other benefits, plus a potential $27 million repayment of federal funds received to care for the poor.

But none of those potential budget busters are addressed in the $1.6 billion spending plan for 2015 that the Public Health Trust, which governs Jackson, approved this week and forwarded to Miami-Dade commissioners, who must ratify the spending plan by Sept. 30.

Instead, Jackson’s budget focuses on driving up revenue through increased patient admissions, reducing costs for overtime and temporary staff, and continued improvement of financial indicators, such as days of cash on hand — leading to a projected $12 million surplus for next year.

“None of our indicators are deteriorating as we focus on improved profitability,’’ Mark Knight, Jackson’s chief financial officer, told trustees this week during a budget work.

Knight noted that Jackson has 32 days of cash on hand — well below the industry benchmark of 175 days, but an improvement over prior years — and that the hospital system has been receiving payment for its services within 42 days, exceeding best practices recommendations of 45 days.

Despite the positive indicators, though, Joe Arriola, a Jackson trustee, said he was concerned about the hospital system’s chances of hitting budget targets for increased inpatient admissions — since admissions have been dropping for the past three years.

“Our patient [admission] rate has decreased 6 percent’’ over the past three years, Arriola said, noting that the 2015 budget is based on a 3 percent increase over the current year’s rate.

“So what we’re talking about is a 9 percent increase when I look at it — 9 percent,’’ he said. “I find that extremely, extremely aggressive.”

Jackson will admit about 56,800 patients this year, and administrators expect that number to grow by 1,800 next year, largely in behavioral health patients.

Arriola noted that the budget does not even mention the potential repayment of $27 million that the federal government says it overpaid Jackson.

“This is the most aggressive budget you’ve ever presented,” Arriola said to Knight.

But Carlos Migoya, chief executive of Jackson, said he was confident the hospital system would exceed budget expectations for a fourth consecutive year because administrators would work to meet those goals.

Plus, Migoya said, the budget can be adjusted as the year progresses. He acknowledged that the financial expectations were “aggressive,” but defended that position.

“We have tested the numbers,” he said “and we have made sure that we make this an aggressive budget, like we do everything else. However, we believe it’s an attainable budget.”

Migoya said the budget does not include the potential repayment in federal funds because the Safety Net Hospital Association, which represents Jackson and other hospitals in the state, is still negotiating a payment plan with the federal government.

“We will know more in the next 30 days what that looks like,” Migoya told trustees, throwing out potential numbers for next year, from $27 million to $8 million. “We don’t know what the number is, but right now, today, it’s a $27 million potential.”

Still, Arriola remained skeptical of the budget Migoya presented.

“I’m having a tough time believing in it,” he said. “These are very tough numbers for me.”

Overall, the budget projects annual revenues to grow to $1.14 billion compared to $1.13 billion for 2014. Operating expenses would also grow by about $11.7 million, from $1.5 billion in 2014 to $1.51 billion in 2015. The gap between revenues and expenses would be closed by Jackson’s annual funding from the county’s half-penny sales tax and property taxes.

That money from the county is projected to increase by about $20 million to a total of $370.5 million in 2015.

Among the many challenges facing safety-net hospitals such as Jackson are changes to Medicaid, the state-federal health program for the poor and disabled. Florida recently moved nearly its entire Medicaid population of about 3.6 million people to private managed care companies, who are expected to negotiate for lower reimbursement rates from hospitals and doctors.

“We have seen reimbursement squeezed, utilization squeezed, increase in denials and stronger management of that population,” Knight said.

Jackson also has been struggling with its labor costs and insufficient staffing, particularly nurses. That has meant Jackson Memorial Hospital — the system’s flagship facility — has been unable to keep all adult emergency rooms open on a regular basis, said David Woolsey, a Jackson physician and union representative.

Knight said the hospital system, which also includes Jackson North Medical Center in North Miami Beach and Jackson South Community Hospital in South Miami-Dade, currently has more than 500 vacant positions.

“Those positions are being aggressively recruited,” he told trustees.

Jackson’s budget calls for adding 184 full-time employees, for a total of 10,259 in 2015.

Irene Lipof, a Jackson trustee, said the hospital system has had a staffing shortage of about 450 employees in the 14 months she has served on the board.

Without enough nurses to staff its emergency rooms and other units, Jackson Memorial has forced some patients to wait as long as eight to 10 hours to be seen, according to labor union representatives. Some of those patients go to other hospitals rather than wait, though Jackson officials say the ER wait times are substantially shorter.

But Jackson hopes to keep more of those patients next year as it hires additional nurses and other staff to process patients and admit them if necessary. Patients admitted to the hospital are reimbursed at a higher rate than emergency room observations.

Jackson also will spend about $50 million in overtime and temporary staffing in 2014. Knight said that was largely because of additional staff needed during an on-site survey for hospital accreditation, and the transition to an electronic health records system required under the Affordable Care Act.

For next year, administrators have budgeted a $23 million reduction in overtime and temporary staffing, Migoya said.

But labor costs will continue to consume a significant chunk of spending. Next year, Jackson expects to spend $876 million in salaries, wages and benefits — “more than 50 percent of our operating expenses,” Knight said.

Jackson’s budget excludes automatic pay increases and other perks for employees — benefits that labor unions gave up in 2012 when the hospital system was in financial crisis, but which were scheduled to return beginning Sept. 30.

Knight said adding those benefits back into the budget would cost about $18 million next year. The 2015 budget omits them because “it would have created a deficit situation.”

He noted that employees no longer have to contribute 5 percent of their salaries toward healthcare costs, and that last year they received a “gain sharing” pay bonus that other Miami-Dade employees did not receive.

But union representatives accused trustees and administrators of failing to honor their 2012 agreement that those benefits would “snap back.”

“I would say it’s bad business and destructive to morale to mislead and betray our healthcare workers,’’ Martha Baker, president of SEIU 1991, the labor group for nurses and doctors, told Jackson trustees. “We’re asking that you honor the contract you signed.”

Baker said many newly-hired nurses leave for better paying jobs at other local hospitals after only a year or two at Jackson. She told trustees that 225 out of the 582 nurses that Jackson has hired since 2010 have left the hospital system. Jackson Memorial had 108 nurses working in the adult emergency room in 2012, and 82 nurses this year.

“We’re pushing them out the door by stagnating wages,” Baker said.

High labor costs are not the only expense weighing down the budget, though. Jackson also has expenses that increase each year, with little opportunity for the hospital system to reduce them, such as healthcare for inmates at Miami-Dade jails, an expense that will grow from $26.1 million in 2014 to a projected $32.5 million next year — largely because of a consent order enforced by the federal government.

“The Department of Justice … has required some significant increases in expenditures relative to personnel, especially in the patient care area in our five jail locations around the county,” Knight told trustees.

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